Domestic Economy

Smuggling Exacting a Heavy Toll

Smuggling Exacting a Heavy TollSmuggling Exacting a Heavy Toll

While there is no reliable data on the exact amount of contraband smuggled into the country, Habibollah Haghighi, head at the Central Taskforce to Combat the Smuggling of Goods and Foreign Currency puts the figure at $10 billion to $25 billion every year, according to an article by Financial Tribune’s sister newspaper, Donya-ye Eghtesad.

Some authorities claim that a considerable share of smuggling is conducted through formal trade channels. According to Justice Minister, Mostafa Pour-Mohammadi, false or misleading information provided by traders and lack of proper supervision by customs authorities leads to huge amounts of smuggled goods entering the country via formal trade.

 Unemployment Problem

While some authorities suggest improving the competitiveness of domestic products in terms of price and quality and encouraging the use of domestic goods as a remedy for the seemingly unstoppable flow of smuggled products into the national markets, some experts believe the high rate of unemployment, particularly in the border provinces is a root cause of the problem.

Haghighi recently announced a comprehensive plan to prevent and reduce smuggling, noting that addressing the economic problems and utilizing the capacities in the border provinces is among the taskforce’s priorities for combating smuggling.

  High Import Tariffs

The prohibition of some products and the high import tariffs are viewed as other major causes for the traders resorting to illegal imports.

Deputy Head of Iran’s Customs Authority, Mohamamd-Reza Naderi believes restrictions imposed on import of certain commodities gives rise to smuggling of that commodity.

Referring to the recently passed legislation on ‘removing barriers to competitive production and improving the country’s financial system,’ he said the law can help increase transparency and remove some barriers to foreign trade, which would help reduce smuggling.

  Cultural and Economic Factors

A board member of Tehran Chamber of Commerce, Pedram Soltani believes while most of the measures so far adopted against smuggling have been through police force, many economic and cultural factors that give rise to smuggling remain to be addressed.

Noting that unemployment is a major cause of smuggling in the border regions, he said the country’s centralized economic model has lead to the concentration of economic activities in some regions, while the border regions remain largely underdeveloped.

  FTZs as Smuggling Hubs

Soltani said disorganized positioning of free trade zones (FTZs) and failure to achieve the objectives set for these zones have lead to these areas becoming major smuggling hubs.

“A handful of FTZs were created in the northern and southern regions of the country, without any consideration for the suitability of these areas for the economic activities they were intended for,” he lamented.

He noted that fuel is a major outward smuggled commodity due to relatively low energy costs in Iran compared with other countries in the region.

Iranian business magnate and board member at Tehran Chamber of Commerce, Asadollah Asgaroladi says while the customs authorities prohibit entry of commodities that lack the required import documents, the goods remain in the customs warehouses for months rather than being returned to their country of origin.

“After spending about 3 months in the customs warehouses, the commodities are sold in auctions. This is how the illegal commodities find their way to the domestic market at lower prices.”